Sechaba poised to bounce back

SHARE | Monday, 22 May 2017 | By Kabelo Adamson

Though volumes are still down, local brewing entity Sechaba Brewery Holdings Limited (SBHL) is adamant that its business is in the best shape than ever before. Sechaba is the holding company of Kgalagadi Brewery Limited (KBL), producers of a number of beer brands and soft drinks as well as Chibuku. The company Managing Director, Johan de Kok, told the media and analysts on Friday that for the first time ever business across all three segments – beer, traditional beer and soft drinks – is in good space. This is despite the company recording 18.2 percent decline in profits. De Kok was announcing the results of the company for the year ended 31 December 2016, this is after, the business changed its financial ending period from 31 March, meaning that the current results are for nine months period. During the period, KBL volumes went down by 1.7 percent, largely taken down by the soft drinks business which climbed down into the negative category at minus 8.3 percent. The volumes, however, include those of Coca Cola brands which the KBL has been bottling over the years. The brands are now set to be excluded from KBL operations following acquisition of SAB Miller by AB Inbev in a multi-billion Dollar transaction completed in October last year. According to De Kok, there were a number of contributing factors to the decline in soft drinks volume, chief among them being increased competition which has seen an unpredicted rise in what it is referred to as ‘B’ brands in the soft drinks market.

Choppies and Sefalana’s soft drink brands which De Kok said are being sold at prices far below KBL ones, contributed highly to the decline in soft drinks volumes. De Kok said another factor is that they stopped the supply of Mazoe, a Zimbabwean squash drink while imports have also risen during that period. KBL, producers of Castle Lite and Black Label among others, has seen an increase of 1.7 percent in the lager beer business and KBL boss said as it has become the norm, it was driven mainly by Black Label which suggests that the beer remains a favourite among the locals. Castle Lite – the brewing company’s premium brand – was under pressure, according to De Kok. The traditional beer line has been turned around from the negative category into the positive. According to De Kok, the business recovered around the December period when consumption tends to be up. The business line, which includes Chibuku – a traditional beer produced from sorghum –, was up by 2.4 percent. The overall decline in volumes was due to lower consumer confidence as the economy continues to shed jobs, De Kok said. De Kok said the pinch was mostly felt around Francistown and Selebi-Phikwe regions where thousands lost jobs as a result of mines in those towns. After battling with government for years over the controversial alcohol levy, De Kok announced that they have found common ground with the administration.

He said the levy has now been amended effective April last year and will see beverages with alcohol content of 5 percent and less attract a 50 percent levy. Brews such as Black Label with alcohol content above 5 percent will on the other hand remain at 55 percent, of which it is the last adjustment to be administered by government. According to KBL chief, additionally the levy on locally produced alcohol beverages has been changed to include duty payable in terms of Customs and Excise Duty Act. This, he said, is good news for the business which has been battling with the levy since its introduction by President Ian Khama nine years ago, supposedly to curb alcohol consumption among the citizens. The above amendments are however meant to apply to locally produced beer products only, meaning that Sechaba stands to profit hugely from the changes.